Pound to Dollar Week Ahead Forecast: Two-Month Best, 1.20-1.30 2025 Ranges

February 23, 2025 - Written by Tim Boyer

STORY LINK Pound to Dollar Week Ahead Forecast: Two-Month Best, 1.20-1.30 2025 Ranges

Currency exchange strategists at HSBC expect dollar strength will drive the Pound to Dollar exchange (GBP/USD) down to 1.20 at the end of 2025.

CIBC, however, expects GBP/USD will strengthen to 1.30 at the end of 2025 with a further advance to 1.35 the following year.

GBP/USD secured 2-month highs around 1.2670 during the week before a retreat to 1.2640 amid global growth concerns.

Tensions over the Ukraine situation intensified dramatically with the US holding talks with Russian officials in Saudi Arabia while President Trump also criticised Ukraine President Zelensky.

The rhetoric increased unease over the European security concerns and pressure for increased UK defence spending continued to intensify.

This would, however, ramp-up underlying pressure on Chancellor Reeves and UK yields have moved higher.

According to ING, “Higher gilt yields mean a higher bar for a credible spending plan. If gilt yields are pressing their January highs at the time of the March review, this means either: a) the Chancellor will need to deliver deeper spending cuts or b) UK asset markets get hit should her plans not look credible.”

It added, “Neither scenario is a good look for sterling, and that is why we doubt GBP/USD holds any near-term gains over the 1.26 area.”

US monetary policy will be a key element.

Nordea expects the Federal Reserve will have to maintain a restrictive stance; “The strong performance of the economy and financial markets also emphasizes that financial conditions and monetary policy are not particularly restrictive. With inflation expectations on the rise and tariffs on the rise, we believe the Fed’s current wait and see stance will become permanent.”

High yields would tend to underpin the dollar.

On a longer-term view, however, Nordea expresses doubts whether the dollar will remain strong.

It noted, “the outlook is becoming less clear, and we are seeing signs that Trump’s policies are starting to undermine the global trust in the dollar. If public institutions are seen to be under pressure, finding foreign investors to fund the US deficit will become harder.”

Nordea added, “The dollar has been on a bull run against the euro since 2008, mostly for good reasons, giving investors plenty of time to build up large, structural dollar positions. When the tides eventually turn, the countermove will be large.”

The latest US PMI business confidence data also indicated an unexpected slide into contraction territory for the services sector.

Businesses cited uncertainty and Federal spending cuts as damaging confidence.

According to CIBC, “while consumer spending has sustained US economic strength, it has recently been financed by spending out of savings alongside rising asset prices. Moving into H2, declining real incomes and increasingly depleted excess savings may be a headwind which could test US exceptionalism.”

CIBC added, “moving into the second half of this year, we continue to expect a broader USD depreciation, with the Fed easing more than is priced.”

HSBC expects dollar strength will be sustained; “Unless there is a dramatic shift in the underlying macro picture – for the US and globally – we find it difficult to envisage a large and sustained decline in the USD.”

HSBC added, “We are just barely a month into the new Trump administration; it is important not to be lulled into a false sense of security. And the same too with thinking the strong USD story is over.”

According to MUFG trade policy will strengthen the dollar; “The US dollar should bounce back strongly in Q2 if Trump follows through and implements some of these more disruptive tariffs. We still believe it is premature to drop our forecasts for a stronger US dollar.”

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Currency Predictions Pound Dollar Forecasts